Vatican posts surplus but donations drop

VATICAN CITY The Vatican posted a 2.2 million euro ($2.85 million) budget surplus for 2012, an improvement from the previous year and some good news as it struggles to cope with a scandal involving its embattled bank.

In its annual financial statement Thursday, the Holy See said better management had helped it recover from one of its worst deficits a year earlier, when it booked a 14.9 million euro shortfall.

A 12 percent drop in donations from ordinary faithful, a 5 percent drop in offerings from religious orders and 5 million euros in new property taxes in 2012 prevented an even better result. Most of its expenses were for its 2,823 staff and the steep costs of running the Holy See's global radio programming.

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The Vatican City State, which runs the profit-making Vatican Museums, post office and supermarket, has a separate budget. Its profits were 23.08 million euros, up from 21.8 million euros in 2011. Fifty more people came to work in this branch of the Vatican in 2012, bringing its staffing up to 1,936.

The annual report, which was approved by a group of cardinals on Wednesday, followed one of the most convulsive weeks in the Vatican's recent financial history: Last week, Pope Francis created a commission of inquiry into the Vatican bank, long the source of scandal for the Holy See. Two days later, a Vatican accountant was arrested in an elaborate 20 million euro smuggling plot. And on Monday, the Vatican bank's two top managers resigned, apparently because they weren't embracing the Holy See's new push for financial transparency sufficiently.

Such problems have fueled calls for Francis to simply close the bank down. But the bank, known as the Institute for Religious Works, or IOR, plays a critical role in the Vatican's financial health. As it does every year, the IOR handed over 50 million euros to Pope Francis for his charitable efforts, along with 5 million euros in separate disbursements to other charities, the financial report said.

The IOR is able to do so thanks to the profits it earns investing and performing asset management services for its 19,000 clients, most of them priests, Vatican employees and religious orders.

Francis got a first-hand update on the bank's problems when he attended the budget meetings on Wednesday: The new president of the bank, Ernst von Freyberg, gave a presentation "on the institute's current situation, followed by a broad discussion on suitable clarifications," a Vatican statement said.

Also briefing the council was a consultant for the Vatican's main financial department, the Administration of the Patrimony of the Apostolic See, or APSA, which until recently employed Monsignor Nunzio Scarano as its chief accountant. Scarano was suspended a few weeks ago amid a money-laundering probe launched by prosecutors in his native city of Salerno; he has been jailed in Rome since Friday in a separate money smuggling case.

According to the Vatican, the cardinals attending the meeting "encouraged the reform necessary to reduce costs through the simplification and rationalization of existent bodies" -- a hint that there might be some slimming down in the Vatican bureaucracy in the coming months as Francis kicks off his long-awaited reforms.